New Zealand's trading links with ASEAN
New Zealand's trading links with ASEAN
Trade Minister Phil Goff's speech to the Gateway to ASEAN conference at the Auckland Chamber of Commerce on April 10
It's a pleasure to be able to be here today in Auckland to address the Gateway to ASEAN conference.
Today I want to talk about New Zealand's trading links with ASEAN. In particular I want to look at benefits of the Free Trade Agreements we have done with Thailand, Singapore and Brunei, and preview the FTAs we are currently negotiating with Malaysia and with ASEAN as a whole, where we are working jointly with Australia.
New Zealand's trading links with ASEAN are stronger than ever. Today ASEAN collectively is New Zealand's fifth largest trading partner.
New Zealand businesses did more than $2.3 billion dollars worth of goods trade alone into ASEAN markets in 2005, and this figure is growing by two to three per cent per annum.
Since 2000, New Zealand has concluded trade deals with Thailand, Singapore and Brunei through the Trans-Pacific Economic Partnership, and initiated trade deals with Malaysia, and with ASEAN as a whole.
Outside of ASEAN but relevant to it, we are currently in negotiations with China. Six rounds have been held to date, with good progress made. We are now entering a crucial phase where substantive differences need to be bridged. These are complex negotiations and China's first with a developed country.
Premier Wen Jiabao's visit last week gave the talks a useful boost expressing his commitment to a high quality, comprehensive and balanced outcome. He pressed for accelerated progress.
A good quality agreement could result for New Zealand in a boost of between $260 and $400 million in extra exports to China each year for the next 20 years.
On other FTAs we are exploring the possibility of negotiations with the Philippines. We are looking at the possibility of free trade negotiations with the six states of the Gulf Cooperation Council's six member states. We continue to pursue the US to start negotiations for an FTA. We are also exploring the prospects in the medium term of FTAs with Korea and Japan.
Free trade agreements improve the trading relationship by lowering and eliminating border tariffs, improving conditions for services exporters and investors, and providing the rules necessary for a more secure trading environment.
FTAs complement what we are doing through the World Trade Organisation. The WTO negotiations are our priority. They can deliver gains to New Zealand businesses, such as removal of trade distorting export incentives and domestic support, that cannot be achieved by bilateral deals. They also give the advantage of delivering tariff reductions and other trade liberalising measures across a wide range of countries.
However, negotiating a deal with 149 other countries takes time and may not deliver optimum results in key markets. While we are working to achieve an outcome to the Doha Round this year, before the expiry of the US Trade Promotion Authority, this cannot be guaranteed. It is wise not to have all our eggs in one basket.
This is why New Zealand pursues FTAs in addition to the WTO negotiations. They can deliver targeted benefits in less time. They can also deliver other benefits by building a closer relationship between ministers and officials of both countries, which provides the potential to deal with issues between governments more effectively
They improve regulator-to-regulator cooperation that can lead to agreement on further ways to make trading easier. They can be helpful by raising the profile of the relationship and focusing attention on how we can leverage the agreement for the greatest gains.
As well as the WTO and bilateral free trade agreements, regional arrangements can also provide progress in freeing up trade.
Under APEC, significant though not yet sufficient progress has been made towards the Bogor goals of removing tariffs in developed countries by 2010 and developing countries by 2020. Guidelines have also been set for ensuring bilateral free trade agreements more consistently meet high standards.
The East Asia Summit, which we became members of last year, also offers interesting potential. Last week, Japan's Minister of Economy, Trade and Industry announced that Japan would ask the ten Asean member countries and China, South Korea, India, Australia and New Zealand to consider launching free trade talks in 2008 as a precursor to the establishment of an East Asia economic community.
This is consistent with our own support for a regional free trade agreement among APEC members and the Trans-Pacific Strategic Economic Partnership's goal of expanding to include other countries.
It is also consistent with our desire for a free trade agreement with Korea and Japan.
There is some distance and numerous obstacles to be overcome for this proposal to achieve widespread support within the region. We are however fully supportive of further exploring ways to progress it.
Let me look at some of the benefits to New Zealand businesses through the deals concluded with Thailand, Singapore and Brunei.
The Thai deal that came into force in July last year delivers a commitment to remove all tariffs and quotas on all goods over time with one of the most dynamic economies in ASEAN. Thailand was one of our largest Asean trading partner in 2005, with two-way trade of $1.3 billion. The agreement provided immediate duty free access to more than half our current exports. Virtually all manufactured exports from New Zealand will enter Thailand duty-free from 2010.
Before the deal, more than 85 per cent of New Zealand's exports were subject to duties at the border. Today, that figure is less than 50 per cent and will be at 30 per cent by 2015. By 2025, all New Zealand goods will enter duty free.
One of New Zealand's largest exports to Thailand, infant milk food, has entered duty free from day one, as have exports ranging from apples and sawn timber through to gas pumps and tuna.
The deal also helps importers. While some 65 per cent of imports from Thailand already enter duty free, the final tariffs on imported Thai goods will be eliminated over 10 years by 2015. In removing own tariffs, we equally have given our own local industries such as textiles, clothing and footwear until 2015 to adjust.
The deal involves more than goods. Investment is covered in the agreement and provides that investors of both countries be treated at least as well as local investors in committed services sectors. Further, in a number of manufacturing sectors, Thailand has committed to allow 100 per cent foreign equity in investments.
For frequent business visitors, Thailand has confirmed that New Zealand business visitors will be eligible to apply for one-year multiple-entry non-immigrant business visas valid for visits of 90 days a time.
Improving the business environment is a key part of this and other agreements. For example, the agreement with Thailand establishes mechanisms for sharing information, cooperating, and consulting on areas such as customs procedures, human and plant/animal health, standards issues, electronic commerce, intellectual property, competition policy, government procurement and general transparency.
New Zealand Trade and Enterprise is working with MFAT and other agencies to lift the profile of links of the Thai market. NZTE ran missions to and from Thailand incorporating representatives from a number of the New Zealand business sectors that will benefit from the agreement. NZTE has also organised events in Thailand to raise the profile of New Zealand businesses.
Further events and promotions are scheduled for May 2006 to coincide with the anniversary of 50 years of diplomatic relations between Thailand and New Zealand. This includes a New Zealand festival event incorporating film, food and beverage, and wine promotion elements.
Strategic Economic Partnership
The Trans-Pacific Strategic Economic Partnership, the P4 Agreement, between New Zealand, Singapore, Brunei Darussalam and Chile, is the first multi-party trade agreement linking Asia, the Pacific and Latin America.
In terms of exports, on the date the P4 comes into force 89 per cent of our exports to Chile will cross the border duty-free, as will 92 per cent of our exports to Brunei. We already have bound 100 per cent duty free trade with Singapore under the existing Closer Economic Partnership that came into force in 2001. These changes will produce small but worthwhile benefits in our trade with Chile.
In terms of protections for our industry, P4 has similar rules to the Thai deal that will ensure our suppliers are not facing unfair competition. These include rules to determine which goods qualify for tariff preferences as well as rules to counter unfair trade such as anti-dumping and countervailing provisions.
An important component of the P4 is the 'negative list' of commitments on trade in services that also locks in liberalisation. This builds upon the previous Closer Economic Partnership with Singapore in 2001, which ensured that service suppliers operating in Singapore would be on the same footing as domestic service suppliers across a wide range of sectors including taxation services, real estate, and aircraft repair and maintenance.
In Chile, the same domestic standing applies and includes sectors such as language training, research and development, manufacturing and retail services, environmental consultancy and transportation services.
With Brunei, the services deal is still on its way. Brunei came into the negotiations at a very late stage and has been given two years from entry into force to negotiate their services outcome.
The services outcome in P4 was particularly important as New Zealand managed to secure very similar commitments to the United States, which entered into an FTA with Chile in 2002, and with Singapore in 2003.
I want to now turn to our current negotiations for an FTA with Malaysia and ASEAN.
The FTA with Malaysia will be our fourth with a member of ASEAN. The negotiations began in May last year and since then five negotiating rounds have been held. Round six, viewed by both countries as the final round, is coming up in Kuala Lumpur later this month.
Parties are in the final stages of negotiation with offers and schedules being considered.
On goods, only a limited range of tariff lines remain to be dealt with. Negotiators are working closely with the key industries involved to get the best possible outcome.
On services, liberalisation is a difficult domestic issue for Malaysia and up-front services improvements are likely to be modest. The key for New Zealand is trying to secure most favoured nation status so that our exporters are not disadvantaged in the future relative to their overseas competitors.
On investment, a large amount of technical work remains to be completed in the final round.
Good progression has been made with Malaysia, but a number of issues will need to be crunched in the final round. The Ministry of Foreign Affairs and Trade will continue to be actively engaged with key industries in the build up to this round.
ASEAN, Australia/New Zealand
Australia and New Zealand are negotiating jointly with ASEAN on an ASEAN-Australia/New Zealand Free Trade Agreement.
The negotiations were launched at the Summit commemorating 30 years of partnership in November 2004 and guiding principles were established for the negotiations. These principles call for a comprehensive FTA covering goods, services and investment and full implementation within 10 years.
The first round began in March 2005, and the fifth round was held last week in Rotorua. The target for completion of negotiations is March 2007.
The ASEAN, Australia/New Zealand FTA is an ambitious goal, and the 2007 timeframe reflects the fact that negotiating with Australia and the ten countries of ASEAN is a more complex process than negotiating a bilateral FTA.
The Rotorua meeting tackled the modalities for laying down offers for goods and services. These need to be agreed as quickly as possible to allow maximum time for the negotiations over products and services to take place.
On rules of origin, we want rules that align with other rules of origin used in our existing bilateral FTAs. Australia and New Zealand have promoted the Change of Tariff Classification approach. Our trade agreement with Australia, Thailand, Singapore, Brunei and our negotiations with Malaysia all work on this basis.
The CTC approach means that for the majority of tariff lines an exporter need simply satisfy the condition that these has been a change in tariff classification between any imported good from third countries and the completed good that in being exported to a designated market.
The CTC rules shift the focus from the origin of imports (based on a value content threshold) and give manufacturers a greater choice of materials. This will help increase efficiency and competitiveness in an increasingly globalised market. The rules also significantly reduce the need to keep financial cost records to support ROO claims.
Australia and New Zealand recognise some of the technical issues that countries face in moving to CTC, and have sponsored workshops in the region to build capacity. We are prepared to do more.
The goal we have set negotiators is to be ambitious and deliver a comprehensive agreement. We already have some high quality agreements between the CER partners and ASEAN members and want these agreements to be the basis for commitments in the ASEAN-Australia/ New Zealand FTA.
Securing FTAs is important, but such agreements simply open the gate for greater trade business. We want to partner with business in making sure the best use is made of these FTAs.
Having concluded FTAs with Singapore, Thailand and P4, we need to leverage commercial benefits from them. We need to look at opportunities to undertake trade missions in both directions. We also need to foster a New Zealand Incorporated approach showcasing the goods and services of New Zealand business.
Working with MFAT and NZTE, I look forward to the business community ensuring that more open markets are used to develop trade and investment links and to grow New Zealand's presence in the region.